Government-mandated pump prices completely stifled Sinopec’s profits.
Now that the Olympic glow has left China, some nasty bits of reality are going to start bubbling to the surface again. One of those bits is the report from China Petroleum and Chemical Corporation (NYSE: SNP, Stock Forum) (Sinopec) that its profit is off 77% in the first six months of 2008. The company's refineries saw throughput of nearly 600 million barrels during that time, and production from its oil fields of about 150 million barrels.
In other words, Sinopec imported 450 million barrels of oil in the first half of 2008 at an average price of more than $100/barrel. Yet the government-mandated pump prices completely stifled the company's profits. The refining losses alone topped $6.7 billion.
Sinopec expects to increase its refining throughput by about 40 million barrels for the remainder of 2008. The big question is how much longer the Chinese government will continue to subsidize pump prices.
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